UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS General Certificate of Education Advanced Subsidiary Level and Advanced Level

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1 UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS General Certificate of Education Advanced Subsidiary Level and Advanced Level * * ACCOUNTING 9706/22 Paper 2 Structured Questions May/June hour 30 minutes Candidates answer on the Question Paper. No Additional Materials are required. READ THESE INSTRUCTIONS FIRST Write your Centre number, candidate number and name on all the work you hand in. Write in dark blue or black pen. You may use a soft pencil for rough working. Do not use staples, paper clips, highlighters, glue or correction fluid. DO NOT WRITE IN ANY BARCODES. Answer all questions. All accounting statements are to be presented in good style. International accounting terms and formats should be used as appropriate. Workings must be shown. You may use a calculator. At the end of the examination, fasten all your work securely together. The number of marks is given in brackets [ ] at the end of each question or part question Total IB12 06_9706_22/RP This document consists of 13 printed pages and 3 blank pages. UCLES 2012 [Turn over

2 1 Bart, a sole trader, provided the following trial balance for the year ended 30 April $ $ Sales Revenue Inventory at 1 May 2011 (at cost) Raw materials Work-in-progress Finished goods Purchase of raw materials Purchase returns Manufacturing wages Indirect factory wages Factory buildings at cost Factory machinery at cost Office equipment at cost Provision for depreciation: Factory machinery Office equipment Insurance General factory expenses Factory supervision salaries Heat and light Administrative expenses Office salaries Trade receivables Provision for doubtful debts Trade payables Bank Capital Additional Information: 1 Inventory at 30 April 2012 (at cost): $ Raw materials Work-in-progress Finished goods Depreciation is provided on non-current assets at a rate of 20% per year using the reducing balance method. 3 The following expenses should be apportioned as follows: Factory Office Insurance 70% 30% Heat and light 80% 20% 4 On 30 April 2012 indirect factory wages of $5000 were unpaid and insurance of $7000 had been paid in advance. 5 Provision for doubtful debts is to be maintained at 3% of trade receivables.

3 3 REQUIRED (a) Prepare Bart s manufacturing account for the year ended 30 April [19] [Turn over

4 4 (b) Prepare Bart s income statement for the year ended 30 April [8]

5 (c) State three examples of how the prudence concept has been applied in the preparation of Bart s manufacturing account and income statement [3] [Total: 30] [Turn over

6 6 2 The following statement of financial position of Mhairi, a sole trader, was drawn up at 30 April Statement of Financial Position at 30 April 2012 $ $ $ Non-current assets Equipment Fixtures and fittings Current assets Inventory Trade receivables Current liabilities Trade payables Bank Net current assets Financed by Capital Add Profit for the year Less Drawings Additional information: 1 On 1 May 2012 Mhairi admitted Aiden as a partner. 2 The profit sharing ratio between Mhairi and Aiden was agreed at 3:2. 3 Aiden agreed to pay a cheque to the partnership for $ and bring in vehicles valued at $ and inventory valued at $ It was agreed that goodwill be valued at 2 times the average net profit earned over the past 4 years. Goodwill is not to be retained in the books. The following figures were available: Year ended 30 April Net sales income $ Net profit percentage %

7 7 REQUIRED (a) Calculate the value of the goodwill. [3] (b) Prepare the capital accounts of Mhairi and Aiden after the admission of Aiden as a partner. [11] [Turn over

8 8 (c) Prepare the statement of financial position of the new partnership at 1 May [8]

9 (d) Outline four advantages to Mhairi of forming a partnership with Aiden [8] [Total: 30] [Turn over

10 3 Winston Ltd had estimated the following factory indirect costs for its financial year ended 30 April $ Indirect wages Repairs and maintenance of machinery Rent and rates Machinery insurance Premises insurance Electricity power Depreciation of machinery Consumables The company calculated a suitable overhead absorption rate for each of its two production departments using the following information. Production departments Service departments Machining Assembly Maintenance Canteen Machine cost ($) Direct machine hours Direct labour hours Floor area (square metres) Power usage (%) Number of employees Consumables ($) The proportion of work done by each service department was: Machining Assembly Maintenance Canteen (%) Maintenance (%) 80 20

11 11 REQUIRED (a) Complete the following table to calculate the total overheads for each production cost centre. Cost Basis Machining Assembly Maintenance Canteen [12] (b) Calculate the appropriate overhead absorption rate for each production department. Machining Assembly [4] [Turn over

12 12 The actual results for the year ended 30 April 2012 were as follows: Machining Assembly Factory indirect costs ($) Direct machine hours Direct labour hours REQUIRED (c) Calculate the amount of overhead which would be over or under-absorbed by each production department. [4] (d) Explain how the results in (c) could have occurred. [4]

13 13 (e) Explain the problems associated with using predetermined overhead absorption rates in calculating the price of a product. [6] [Total: 30]

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16 16 BLANK PAGE Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity. University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

Cambridge International Examinations Cambridge International Advanced Subsidiary and Advanced Level

*1440226124* Cambridge International Examinations Cambridge International Advanced Subsidiary and Advanced Level ACCOUNTING 9706/22 Paper 2 Structured Questions October/November 2014 1 hour 30 minutes